The Board of the Zakat, Tax, and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia (KSA) has approved an amendment made to the local Value Added Tax (VAT) Implementing Regulations, aimed at easing the cashflow impact for those making taxable supplies in the Kingdom directly to government bodies, and also confirming the authority’s view on the proper time of supply where goods are paid for in instalments.
There will be consequential changes to the format of the local VAT returns when the changes take effect from 1 November 2021. The KSA VAT return form will have a new field added for standard-rated supplies to government entities.
Suppliers providing services to government bodies should review their current project portfolio urgently in order to identify which supplies will be impacted, and to consider any process or system changes to ensure they can take advantage of the legislative amendment.
The go-live date for the first phase is 4 December 2021, and the go-live date for the second phase is 1 January 2023. The latter will be implemented in a phased roll-out, and ZATCA will inform the targeted/selected taxpayers six months before integrating with the Authority’s system.
The first phase of electronic invoicing (e-invoicing) is expected to be implemented in KSA by the end of this year.
As previously announced, there will be two major phases: (1) the Generation phase and (2) the Integration phase.
Businesses in KSA should take action as a matter of priority to ensure that they are in compliance with the e-invoicing requirements by the applicable deadlines. There are now less than 40 days remaining until the go-live date for the first phase, and as such, businesses should ensure that they are in a compliant position by the deadline to avoid penalties for non-compliance.
The Oman Tax Authority (OTA) has issued a guide on VAT and Special Zones, to set out principles on the applicability of transaction taxes on transactions related to so-called Special Zones. In essence, simplifying rules apply on supplies of goods and/or services from, to or within these Special Zones under the Oman VAT Law and Executive Regulations. Special Zones are part of the territory of the Sultanate of Oman.
Special Zones are defined to include Free Zones, Economic Zones and other Zones that may be designated as “Special Zones” from time to time. Four Special Zones have been subject to clarifying notes from the OTA and Zone authorities so far – Al Mazunah Free Zone; Sohar Free Zone; Salalah Free Zone; and Duqm Special Economic Zone.
In the newly released VAT Guide, the OTA has indicated the following treatments to be adopted by businesses operating within the Special Zones or by businesses transacting from the Oman mainland (or outside Oman) with businesses in the Special Zones:
Sr. |
Nature |
Supply of goods |
Supply of services |
---|---|---|---|
1 |
Supply of goods and/or services; or movement of goods - from the Oman mainland to a Special Zone or within the Special Zone |
Note: the customer located in the Special Zone must sign a statement, which confirms it is licensed to operate in the Special Zone and that the goods are for the purpose of carrying out that licensed activity in the Special Zone and provide this to the Supplier. The Supplier shall not apply the zero rate if he does not hold such a statement |
|
2 |
Supply of goods and/or services; or movement of goods - from a Special Zone to Oman |
|
Taxable at standard rate of 5%, unless such services are exempted or zero-rated as per the VAT Law and Executive Regulations |
3 |
Import of goods and/or services - from outside Oman into a Special Zone |
Note: The importer would have to submit a guarantee to the Directorate General of Customs equal to the value of the VAT due and such guarantee must be valid throughout the period of tax suspension. This guarantee can be in form of a (i) bank guarantee, or (ii) financial guarantee, or (iii) written guarantee, or (iv) any other type determined by the Directorate General of Customs |
|
4 |
Supply of goods |
Note: we understand that |
|
5 |
Transfer of goods or |
|
|
6 |
Supply of goods |
|
|
The details of your specific transactions matter – in our experience, determining the right VAT treatment for transactions involving Special Zones is a complex area. When in doubt please consult – we have often seen businesses make mistakes that start as minor but then cause major headaches.
This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.